PROSPECTUS SUPPLEMENT DATED MAY 28, 1998 Rule 424(b)(3)
(To the Prospectus dated October 6, 1997) File No. 333-36353
864,863 Shares
FRENCH FRAGRANCES, INC.
Common Stock
_________________________
For a discussion of certain material factors that should be considered in
connection with an investment in the Shares, see "Risk Factors" commencing on
page 3 of the Prospectus.
_________________________
RECENT DEVELOPMENTS
Acquisition of the Assets of J.P. Fragrances, Inc.; Senior Note Offering.
In March 1998, the Company consummated the acquisition (the "JPF Acquisition")
of certain assets of J.P. Fragrances, Inc. ("JPF"), a distributor of prestige
fragrance products, including inventory, returns, contract rights, accounts
receivable, books and records, fixed assets (including office and warehouse
furniture and equipment), claims, intangible rights (including non-compete
agreements) and goodwill (collectively, the "Acquired Assets"). The Company
also assumed approximately $10.6 million of certain trade and other payables
of JPF. In addition to the assumption of the payables, the purchase price for
the Acquired Assets consisted of approximately $37.3 million in cash and a
subordinated debenture of $3 million (the "Debenture"). The cash portion of
the purchase price was financed from available cash from operations and the
Company's revolving credit facility (the "Credit Facility") with Fleet
National Bank ("Fleet"). The Debenture is non-interest bearing, with the
principal amount being payable in three equal annual installments if, and only
if, certain conditions relating to the fragrance business of JPF (the "JPF
Business") are achieved by the Company, including achieving certain gross
profit thresholds from the JPF Business. As a result of the JPF Acquisition,
the Company acquired approximately $30.4 million of inventory, $12.1 million
of accounts receivable, $263,000 of fixed assets and contract rights,
intangible rights (including non-compete agreements) and goodwill of
approximately $8.2 million.
In April 1998, the Company consummated the private placement under Rule
144A (the "Note Offering") pursuant to the Securities Act of 1933, as amended,
of $40 million principal amount of 10-3/8% Senior Notes due 2007, Series C
(the "Series C Senior Notes"). The Series C Senior Notes were sold at 106.5%
of their principal amount and have substantially similar terms to the
Company's existing 10-3/8% Senior Notes due 2007, Series B (the "Series B
Senior Notes"), which the Company issued in May 1997. The net proceeds of
approximately $41.4 million from the sale of the Notes were used to repay
outstanding borrowings under the Credit Facility and other indebtedness to
Fleet, which were used for the JPF Acquisition, as well as for working capital
purposes. The Series C Senior Notes have not be registered under the Act and
<PAGE>
may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements. The Series C Senior
Notes are expected to be exchanged for Series D Senior Notes containing
identical terms which will be registered under the Act. The exchange offer
will be made only by means of a prospectus.
The Indenture pursuant to which the Series C Senior Notes (and the Series
D Senior Notes following their exchange for the Series C Senior Notes) were
issued (the "Indenture") provides that such notes will be senior unsecured
obligations of the Company and will rank senior in payment to all existing and
future subordinated indebtedness of the Company and pari passu in right of
payment with all existing and future senior indebtedness of the Company,
including indebtedness under the Credit Facility and the Series B Senior
Notes. The Indenture generally limits the ability of the Company to (i)
incur additional indebtedness, (ii) pay any dividend or make any distribution
on account of its capital stock or other equity interest, (iii) purchase or
redeem any capital stock or equity interest of the Company, (iv) make any
principal payment, purchase or redeem subordinated indebtedness except at
scheduled maturities, or (v) make certain investments; in each case subject to
the satisfaction of a fixed charge coverage ratio and, in certain cases, also
a net income test. In addition, the Indenture generally limits the ability of
the Company to create liens, merge or transfer or sell assets. The Indenture
also provides that the holders of the Series C Senior Notes (and the Series D
Senior Notes) have the option to require the Company to repurchase their notes
in the event there is a change of control in the Company (as defined in the
Indenture).
Changes in Management. On February 25, 1998, the Board of Directors of
the Company appointed E. Scott Beattie to serve in the capacity of President
and Chief Executive Officer of the Company. Rafael Kravec remained in the
role of Chairman of the Board of the Company. Mr. Beattie had been serving as
President and Chief Operating Officer of the Company since April 1997. From
November 1995 until April 1997, Mr. Beattie served as Vice Chairman of the
Board of the Company. From September 1989 until September 1997, Mr. Beattie
served as President of E.S.B. Consultants, Inc. ("ESB"), a financial
management and consulting firm that until September 1997 was controlled by Mr.
Beattie. In addition, Mr. Beattie has served as Executive Vice President of
Bedford Capital Corporation ("Bedford"), a Toronto, Canada based firm that is
engaged in the business of providing merchant banking services through two
private pools of capital to middle-market companies, since March 1995 and as
Vice President of Bedford from September 1989 to March 1995. From 1992 until
1997, both ESB and Bedford provided financial advisory services to the Company
in exchange for consulting fees. Mr. Beattie is a director of Cash
Converters, Inc., a specialty retailer, and Janna Systems, Inc., an
applications software company.
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Selling Shareholders. The table of Selling Shareholders set forth on
page 8 of the Prospectus dated October 6, 1997 is updated as follows:
<TABLE>
<CAPTION>
Shares Number Shares Percent of
Beneficially of Shares Beneficially Class Owned
Owned Prior To Being Offered Owned After After
Name This Offering For Sale (1) This Offering (1) Offering (1)
<S> <C> <C> <C> <C>
1003749 Ontario, Inc. 47,418 8,835 38,583 *
Alexander, John 4,742 883 3,859 *
Apex Investment Fund
Limited 35,834 8,835 26,999 *
Atkinson, Robert 12,242 883 11,359 *
Atkinson, William 14,227 2,650 11,577 *
B No. 1, Inc. 18,499 18,499 0 0
Bedford Capital Financial
Corp. (2) 713,251 55,072 658,179 4.6
Bernhard, Jorge 7,114 1,325 5,789 *
Blumberg, Steven (4) 7,125 7,125 0 0
Cairn Capital, Inc. 18,499 18,499 0 0
Canada Decal, Ltd. 4,742 883 3,859 *
Canmerge Consultants
Limited 189,552 15,144 174,408 1.2
Carisle, Donald 4,742 883 3,859 *
Cola Capital Corporation 47,418 8,835 38,583 *
Compagnie d'Assurance du
Quebec 28,455 5,301 23,154 *
Connor, Gerald 79,307 18,084 61,223 *
de Lucia, Marie (4) 17,250 13,250 4,000 0
Devonshire Trust (3) 260,794 25,114 235,680 1.6
Ennis, Edith 47,418 8,835 38,583 *
First Marathon Capital Corp. 65,917 27,334 38,583 *
Friedman, Jack 2,371 442 1,929 *
Guernroy Limited 23,712 4,417 19,295 *
Heckman, Julia (4) 15,125 15,125 0 0
Imperial Life Assurance
Company of Canada 27,748 27,748 0 0
Jalger Limited 47,418 8,835 35,583 *
James Wallace McCutcheon
Foundation 11,721 11,721 0 0
John & Anne Clark Family Trust 4,417 4,417 0 0
MacDonald, Cameron 4,742 883 3,859 *
Marbe Consultants, Inc. 8,835 8,835 0 0
McCutcheon, Douglas 75,131 20,030 55,101 *
Merchant Private Ltd. 36,983 36,983 0 0
Morgan Trust Company of the
Bahamas 8,835 8,835 0 0
National Trust Company Van
P16789 000 01 111,395 27,334 84,061 *
North Simcoe Investments
Limited 86,357 8,835 77,522 *
Peller Holdings, Inc. 58,499 18,499 40,000 *
R&R Partnership 27,334 27,334 0 0
Rabenou, Kameron K. (4) 5,125 5,125 0 0
Rakusin, Bryan 4,742 883 3,859 *
Randall, Robin 4,742 883 3,859 *
Rodman & Renshaw, Inc. (4) 40,625 40,625 0 0
Royal Insurance Company of
Canada 165,973 30,921 135,052 *
Sanders Morris Mundy, Inc. (4) 81,250 81,250 0 0
Tayhold Corp. 47,418 8,835 38,583 *
The GAN Company of Canada
Limited 27,334 27,334 0 0
The Manufacturers Life
Insurance Company 203,037 81,156 121,881 *
Trustees of Royal Insurance
Company of Canada 42,675 7,951 34,724 *
Trustees of K&K Trust 133,931 23,265 110,666 *
Trustees of Wilshire Trust 91,565 23,007 68,558 *
Velden, Peter Van Der 17,391 2,591 14,800 *
Ward, Fred 38,594 4,625 33,969 *
Weldon, David & Heaslip,
William 37,415 8,835 28,580 *
Wijler Holding NV 47,418 8,835 38,583 *
Beattie, E. Scott(5)(6) 857,176 4,285 852,891 5.9
Garcia, Rene(5)(7) 1,026,772 3,220 1,023,552 6.9
Goslin, Gretchen(5)(8) 67,856 3,220 64,636 *
Marina, Oscar(5)(9) 33,189 3,222 29,967 *
Mueller, William J.(5)(10) 71,620 3,220 68,400 *
Dovgin, Steve(5)(11) 21,905 1,905 20,000 *
Gilfarb, Joseph(5)(12) 49,505 1,905 47,600 *
Katz, Allan H.(5)(11) 35,238 1,905 33,333 *
Kravec, Saul(5)(13) 47,505 1,905 45,600 *
Oberlender, Brian(5)(14) 5,239 1,905 3,334 *
Koprowski, Marion(5)(11) 6,284 950 5,334 *
Gonen, Avi(5)(15) 7,142 475 6,667 *
Gruskin, Scott(5)(16) 475 475 0 *
Haber, Martha(5)(11) 13,808 475 13,333 *
Karnegis, Anthony(5)(17) 17,942 475 17,467 *
Mazzotta, Mary Beth(5)(18) 8,808 475 8,333 *
Price, Alan(5)(19) 4,642 475 4,167 *
Yanero, Joseph(5)(20) 2,142 475 1,667 *
Davis, John L. (5)(21) 475 475 0 0
Garcia, Roque A.(5)(22) 190 190 0 0
Patti, David(5)(23) 190 190 0 0
Rattner, David(5)(24) 190 190 0 0
Young, Rob(5) 190 190 0 0
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Totals 5,442,887 864,863 4,578,024
========= ======= =========
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</TABLE>
* Less than one percent of the outstanding Common Stock
(1) Assumes all Shares being registered will be sold.
(2) Bedford Capital Financial Corporation ("BCFC") is a publicly-traded
company which is listed on the Toronto Stock Exchange and has its
principal office in the Bahamas. E. Scott Beattie, President and a
director of the Company, and J. W. Nevil Thomas and Richard C. W.
Mauran, who are directors of the Company, are directors and
shareholders of BCFC. BCFC has requested to join in this registration
because it intends to distribute its assets to all of its shareholders
this year.
(3) Devonshire Trust is a trust of which Mr. Mauran is a trustee.
(4) Shares offered for sale relate to shares of Common Stock issuable upon
the exercise of the Warrants.
(5) Shares were received from an allocation made by the Compensation
Committe of the Board of Directors of the Company (the "Compensation
<PAGE>
Committee") from the Company's bonus pool (the "Bonus Pool"). The Bonus
Pool is funded from 6% of the pre-tax profit of the Company and is
allocated by the Compensation Committee among management and other
personnel of the Company (including persons providing services to the
Company) who have assisted, the Company. The Board of Directors
authorized the Company to acquire 32,202 shares of the Company's Series
C Convertible Preferred from Workers' Compensation Board utilizing funds
from the Bonus Pool for disbursement at the discretion of by the
Compensation Committee.
(6) Mr. Beattie has been President of the Company since April 1997, Chief
Executive Officer of the Company since February 1998 and a director of
the Company since 1992. ESB, a company which was controlled by Mr.
Beattie until September 1997, was a consultant to the Company from July
1992 until September 1997. In addition, Bedford, a company of which Mr.
Beattie is an executive officer, was a consultant to the Company from
July 1992 until April 1997. Mr. Beattie disclaims beneficial ownership
of 64,201 shares of Common Stock which are owned by ESB. See "Recent
Developments-Changes in Management."
(7) Mr. Garcia has been a consultant to the Company since May 1996. The
shares include 1,022,727 shares of Common Stock issuable upon the
exercise of warrants which were issued to Fragrance Marketing Group,
Inc. ("FMG"), a company which is controlled by Mr. Garcia, in connection
with the acquisition by the Company of certain assets of FMG in May
1996.
(8) Ms. Goslin has been Vice President - Marketing of the Company since May
1993.
(9) Mr. Marina has been Vice President, General Counsel and Secretary of the
Company since March 1996.
(10) Mr. Mueller has been Vice President - Operations, Chief Financial
Officer and Treasurer of the Company since April 1993.
(11) Messrs. Dovgin, Katz, Koprowski and Haber have been Vice President -
Sales of the Company since May 1996.
(12) Mr. Gilfarb has been Vice President - Sales of the Company since
December 1992.
(13) Mr. Kravec has been Vice President - Sales of the Company since March
1996 and Vice President and General Counsel of the Company from July
1992 to March 1996.
(14) Mr. Oberlender has been Vice President - Sales of the Company since
August 1997 and a sales employee from 1992 until 1997.
(15) Employee of the Company since August 1994.
(16) Employee of the Company since July 1997.
(17) Employee of the Company since March 1995.
(18) Mr. Mazzotta has been Vice President - Sales Administration since
April 1998 and Director of Sales Administration from May 1996 until
April 1, 1998.
(19) Employee of the Company since May 1993.
(20) Employee of the Company since May 1995.
(21) Employee of the Company since August 1996.
(22) Employee of the Company since September 1997.
(23) Employee of the Company since October 1997.
(24) Employee of the Company since March 1994.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
